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IAI Actuarial Core Principles · Business Management · Business and consumer needs, the industry value chain and competitive forces

Aarav Actuarial Consultants sells reserving and pricing advice only to small Indian co-operative insurers, tailoring models and reports to their limited data and regulatory needs. Larger consultancies find this segment unattractive. Which source of advantage is Aarav most clearly exploiting?

Aarav is exploiting a focus strategy. By concentrating on small co-operative insurers and tailoring its work to their needs, it serves a narrow segment better than broad competitors, who find the segment unattractive, rather than relying on scale, integration or legal protection.

  1. AEconomies of scale across the entire market
  2. BServing a narrow segment better than broad competitors through specialised knowledge (focus strategy)Correct
  3. CVertical integration into insurance underwriting
  4. DGovernment-granted monopoly
  5. Price discrimination across all customers

Explanation

Concentrating on a narrow segment and meeting its particular needs better than broad-market rivals is a focus strategy. There is no mention of scale economies, integration, or a legal monopoly, and the firm is not charging different prices to the same customers.

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